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Why Did Wendy’s Lower Its 2017 Earnings Guidance?

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Part 4
Why Did Wendy’s Lower Its 2017 Earnings Guidance? PART 4 OF 8

Wendy’s: Analysts’ Revenue Expectations in the Next 4 Quarters

Revenue expectations

For the next four quarters, analysts expect Wendy’s (WEN) to post revenues of $1.26 billion—3.1% growth from $1.22 billion in the same four quarters the previous year. Its revenue growth is expected to be driven by adding new restaurants and positive SSSG (same-store sales growth).

Wendy&#8217;s: Analysts&#8217; Revenue Expectations in the Next 4 Quarters

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Revenue growth

Wendy’s SSSG is expected to be driven by the expansion of delivery services, implementation of technological advancements, image activation, and menu innovations. Wendy’s announced that it will expand its delivery services to 48 markets, which would account for ~2,500 restaurants by the end of 2017. The company has partnered with DoorDash to expand its delivery service. Management expects to increase the percentage of image activation restaurants to 42% by the end of 2017 to enhance customers’ experience.

Moving to technological advancements, Wendy’s plans to implement the mobile ordering facility in 75% of its restaurants and 300 kiosks by the end of 2017. Since the beginning of 4Q17, the company has launched chicken tenders with S’Awesome sauce and fresh baked cookies.

Management guidance

Wendy’s management has set its 2017 unit growth guidance to 0.5%–1.0% for North America from the earlier guidance of 1.0%. Management lowered the guidance due to negative weather conditions, which moved the opening of at least 20 restaurants from 2017 to 2018. However, the company maintained its unit growth for international markets at 14.0%.

Management also lowered its 2017 SSSG guidance to 2.0%–2.5% from the earlier estimate of 2.0%–3.0%.

Peer comparisons

During the same period, analysts expect Restaurant Brands International (QSR) to post revenue growth of 10.7%, while McDonald’s (MCD) revenue is expected to fall 12.1%.

In the next part, we’ll discuss Wendy’s 3Q17 EBIT margins.

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